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Funding And free Trade Key: New Challenges for GH2

Amitabh Kant, India’s G20 Sherpa, has pinpointed two major obstacles that hinder the global aim of achieving large-scale Green Hydrogen development for decarbonization: insufficient long-term funding and free trade key.

The cost of green hydrogen, which is currently around $5 per KG, needs to be reduced to $2.5 in the next 2-3 years and further to $1 per KG by 2030, according to a speaker at the World Sustainable Development Summit (WSDS), a global yearly event organised by the TERI here.

“India is the only nation that can deliver the size and scale needed to manufacture green hydrogen, which will be enormous. We need new products that can help us undertake to hedge, as well as long-term loans for 25 to 30 years “added he.

He continued by saying that the developed nations had not kept their promise to contribute $100 billion annually and that for the world to be able to produce green hydrogen, long-term institutional financing and new tools such as blended finance, credit enhancement, first loss guarantees, etc. were required.

“But, these instruments were not created for the funding institutions of the current period of climate change, thus obtaining long-term financing will be impossible unless they are structured to fit both SDGs and climate finance. These global organisations, which carry out a significant amount of direct lending, ought to act as intermediaries for long-term indirect funding, “Added Kant.

According to him, free trade is the second obstacle facing green hydrogen, and the US’s recently enacted Inflation Reduction Act (IRA) and CHIPS Act are the “most protectionist pieces of any law produced ever” in the post-World War II era.

“They only allow for Green Hydrogen produced in the US to be eligible for a $3 per Kilogram subsidy, even if doing so is not economically feasible. Even if it is produced at the lowest cost possible, it does not permit cost subsidies anywhere else in the world. This goes against the fundamental principles of free trade and the market that the US promotes “said he.

He continued by saying that the world would never be able to create green hydrogen at the scale that it needs unless the US allowed trustworthy allies like Australia, India, and Korea to do so, as well as support them in their procurement efforts.

According to Kant, India has accelerated its renewable energy initiative through a highly transparent process of competitive bidding. We currently have about 165 GW of renewable energy capacity, but it’s critical to realise that even with 100% renewable energy, we would only be cleaning up 20% of the energy.

Refineries, steel, chemicals, fertiliser, and long-distance transportation make up the remaining 80% of the economy, and these hard-to-abate sectors must be decarbonized first, according to the speaker. To do this, renewable energy is required to crack water to create green hydrogen in electrolysers.

Source: Economic TimesExport a Substantial Quantity funding

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